Chief sustainability officers should view chief financial officers as partners in the pursuit of broader goals, Rob Doepel, managing partner of EY Sustainability, has told the Economist Impact Sustainability Week summit in London.
In a session entitled CFOs – Driving decisions and value with data, Doepel described a shift in how many businesses organise their sustainability agendas.
“If I go back to two years ago, I spent most of my time talking to CSOs,” he noted. “And now I spend more of my time, if not the majority of the time, talking to CFOs.”
Core governance
As Doepel discussed, reporting and compliance obligations are increasingly moving into finance functions as part of a greater embedding of sustainability within core governance structures.
“The reality is that in many in organisations, the home of high-integrity and controlled data is finance,” he said. “There’s much more scrutiny now on sustainability initiatives, on transition plans, etc, which I think is good. And you need finance involved in that.”
Rigorous analysis
Acknowledging that many CSOs consider CFOs a hindrance to the work they are trying to achieve, Doepel noted that CFOs tend to ask questions about evidence, value and risk, which should be considered constructive. More rigorous analysis, he argued, strengthens business cases and makes initiatives more resilient.
“I think there is a lot of frustration [on the part of CSOs],” he said. “Which often involves questions like ‘Why are you asking all these questions of us?’ ‘We agree we’re going to do this, can we not just get on and do it?’ ‘Why are you holding us back, asking for additional information or additional data?’
“But I think that’s positive. That level of scrutiny needs to go into the evidence, the benefits and the value that these programmes can deliver. […] That means you’ve got something much more robust to defend when you’re doing it.”
Finding a balance
As regards the compatibility of long-term sustainability initiatives with short-term financial reporting, Doepel noted that company boards have a role to play in extending a firm’s outlook beyond immediate reporting cycles, balancing short-term performance with longer-term targets.
“To get executive teams to think longer term, they need more evidence,” he said. “They need more data. They need more quantified business cases and quantified plans. Here’s the impact if we don’t do something. You may not feel it now, but you’re going to feel it in the future.”
The majority of CSOs, he suggested, are effective communicators of purpose and strategy but may struggle to translate ambition into detailed, investable plans – a role that can be adopted by CFOs, focused on assumptions, timing and risk mitigation.
“That ability to move from the strategic down to the detail is what many CSOs are challenged with at the moment,” said Doepel. “So, it’s about that ability to go deeper and be a bit more analytical about getting evidence, and then driving that down to a level that can be investable.”
Shared objectives
A mistake that many CSOs make, he added, is to treat the relationship with CFOs as adversarial – rather, it should be considered a partnership, with both parties recognising the shared objective of protecting enterprise value.
“Many CSOs begin with a starting point that the ‘CFO is against us and trying to shut us down’. And ‘they keep on saying no to our programmes’. But I think what they’re really saying is, ‘I want more information’. So it’s not a ‘no’ – if you can frame it in a different way, if you can provide more evidence, then ‘maybe’.” Read more here.
